What is an example of an external risk factor that organizations need to monitor?

Regulatory changes affecting the industry are a significant external risk factor that organizations must continuously monitor. Regulatory frameworks can evolve due to various reasons, such as changes in government leadership, public sentiment, technological advancements, or emerging threats. These changes can impose new compliance requirements, alter financial liabilities, or require organizations to rethink their operational practices, thus impacting their risk landscape.

Organizations that fail to stay aware of these changes may expose themselves to legal risks, financial penalties, and reputational damage. Monitoring regulatory changes also ensures that businesses can adapt their processes, policies, and controls in a timely manner to remain compliant and mitigate associated risks. Understanding the legal environment is crucial for organizations, as it directly affects strategic planning, operational effectiveness, and overall risk management.

Other options are primarily internal factors or metrics that do not fall under external influences. Internal policy changes, employee turnover rates, and system performance metrics relate more to an organization's internal environment and may not capture the external risks that can impact operations, compliance, or market standing.